Amazon nears debut of original TV shows

Originally published April 17, 2013 at 6:18 pm

Updated April 17, 2013 at 8:31 pm

Actors Joe Dinicol and Sarah Stouffer are shown in an episode of “Betas,” a show about a tech startup. It’s one of 14 TV pilots Amazon is making. Viewers will help the company decide which pilots reach the online masses.

Amazon.com is letting viewers help choose its new lineup of TV shows, scuttling a secretive, wasteful process once reserved for Hollywood tastemakers.

The online retailing giant will let visitors from the U.S., U.K. and Germany watch, rate and critique 14 pilot episodes the company has bankrolled. Viewer comments will help the company decide which shows, if any, get the green light.

“Why follow the guru method when you don’t have to anymore?” says Roy Price, director of Amazon Studios. “The audience is out there and the audience is interested. We might as well make them a partner in the process.”

Amazon’s foray into TV production is unique in the way it saves money. Every spring, traditional TV networks like ABC, NBC, CBS and Fox order dozens of pilots and show them to focus groups. Executives pick just a handful to make into series.

Then they commission 13 episodes of each promising show, with each one potentially costing a few million dollars. Many episodes won’t ever air if the first few don’t attract big audiences.

Amazon is riding a wave of Internet-fueled people power that is transforming the entertainment industry. Crowdsourcing, the act of soliciting content and ideas from the online masses, is getting its moment in the spotlight. Online buzz can make or break movies these days.

And crowd-funding sites like Kickstarter help generate fans and startup capital before would-be producers start filming.

Amazon is testing the market with kids shows and comedies, each just a half-hour long. Going into full production will pay off if enough people sign up to pay $79 a year for Amazon Prime, a service that offers free shipping on Amazon orders, an e-book borrowing service as well as home and mobile access to movies and TV shows.

Prime members will get access to the full original series when completed. Others may get access if they pay.

Under the age-old TV model, any number of things can derail a new program’s ability to draw an audience — a weak lead-in show, for instance, or competition from a big event like Major League Baseball playoffs.

Alan Cohen, a producer of the Amazon comedy pilot, “Betas” — about a high-tech startup trying to create the world’s greatest social-media app — says Amazon’s new way of launching shows could offer creators some welcome relief from the pressure of network TV.

“We’re not just playing that time-slot game,” Cohen says. “Here, you have the opportunity to put it out, and it doesn’t matter exactly what time it airs. People can find the show and it’ll be out there.”

As it makes big bets on online video, Amazon is competing with companies such as Netflix and Hulu.

Netflix debuted its big-budget original series “House of Cards” in February to critical acclaim. The company’s coming quarterly earnings results, due Monday, will be the first indication of whether its investment helped attract more subscribers.

But Amazon has more to gain from growing Prime members than just paying for TV shows. Once people join Prime, according to Benchmark analyst Daniel Kurnos, they tend to buy six to eight times more items from Amazon than nonmembers, in part to take advantage of the free shipping. They also buy digital books and movies that aren’t included as freebies.

Amazon doesn’t divulge how many Prime members it has, other than to say there are “millions.” Kurnos estimates between 6 million and 10 million.

“Amazon has always been trying to drive more customers to Prime. Not because Prime itself is profitable, but because it gives you golden handcuffs,” Kurnos says.

The company gets a second benefit from Prime because third-party sellers pay fees to be included in the Prime free-shipping program, which requires they send their goods to Amazon warehouses for handling. That keeps the company’s facilities humming at fuller capacity, making its deliveries more efficient.

In a sign that the focus on Prime is working, shipping revenue — where Prime membership fees are recorded — is up 57 percent in the quarter through December compared with a year ago. That has pushed net shipping costs as a percentage of total revenue down, helping boost profitability.

Amazon has been investing heavily to persuade more people to sign up for Prime, and recently paid for the exclusive online rights to a number of shows including the second season of “Downton Abbey.”